(By Mani) The patent infringement lawsuit between Vringo, Inc. (NASDAQ: VRNG) and Google, Inc.(NASDAQ:GOOG) is all set to attain cult status in all probabilities as the case goes to trial on Oct. 16.
On one side, a $160 million market cap company that is betting heavily on awards from violation of intellectual property to fuel future growth, and on the other, a giant that controls more than 65 percent of the search market.
Vringo which inherited the lawsuit through its acquisition of Innovate/Protect (I/P), claims its patented technology is responsible for more than 95 percent of Google's revenue. Vringo seeks an award of at least $696 million from Google, which countered that, at most, the claim should be $200 million less.
For the first time readers, Vringo's lawsuit against Google centers on two of the acquired Lycos patents over Internet search and advertising, which is the primary source of Google's revenue. Vringo investors have been betting on a favorable outcome of the patent infringement suit.
By analyzing the latest developments and considering historical facts, it seems that Vringo holds the upper hand in the litigation.
I/P had filed lawsuit in the court of Eastern District of Virginia, which is particularly efficient at trying patent cases. The Eastern District generally rules about 70 percent in favor of the plaintiff in patent cases.
In June, Vringo got a favorable Markman ruling, which determines the appropriate meanings of relevant key words used in a patent claim for the jury. In Vringo's case, the court determined specific meanings of a handful of disputed terms in the suit.
"Often, a Markman hearing may encourage settlement, since the judge's findings can indicate a likely outcome for the patent infringement case as a whole," ViewTrade Research analyst Peter D'Agostino wrote in a note to clients.
Unfortunately, a settlement didn't happen so far and Google also seems to have decided to the settle the issue in the court premises.
Meanwhile, Vringo has an experienced legal team with history of successful outcomes in the patent infringement lawsuits. David Cohen is Vringo's special counsel. Cohen was senior litigation counsel at Nokia Corp. (NYSE: NOK) during Nokia's patent dispute against Apple, Inc. (NASDAQ: AAPL). Nokia got in excess of $700 million from the lawsuit.
The company's litigation counsel is Dickstein Shapiro, which was involved in large jury awards, most recently with Johnson & Johnson (NYSE: JNJ) and Boston Scientific Corp. (NYSE: BSX).
The company has Donald Stout as a part its intellectual property committee. Stout is an attorney and the co-founder of NTP whose patents were infringed by Research in Motion (NASDAQ: RIMM) (TSX:RIM), resulting in a settlement of over $600 million in 2006.
"We would expect VRNG to receive a .75% royalty payment or $500 million payment for the trailing years and at least $100 million annually through 2016. Potentially, Google could settle with a discounted lump-sum payment for future royalties," D'Agostino noted.
Recently, a district judge denied Google's motion for summary judgment in the patent dispute, saying that a summary judgment would be inappropriate as there are genuine issues of material fact in dispute.
"We contend that this ruling only strengthens VRNG's patent infringement claim against Google with the trial commencing on October 16, 2012, in our opinion," D'Agostino noted.
The trial is scheduled to begin on Oct. 16, and is expected to be a two week trial. If an appeal process is necessary, then it would take minimum one year.
However, the past performance of attorneys and historical judgments are not always indicative of future outcomes. If Vringo loses the case, it could be short of cash as it is still not realizing material revenue from its platform. In addition, it may not monetize Lycos patents in future.
But, Andrew Perlman, the CEO of Vringo, should be optimistic about the outcome, especially after AOL (NYSE: AOL) partially settled with Vringo, indicating the authenticity of the claims.